Raytheon 2004 Annual Report Download - page 108

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Notes to Consolidated Financial Statements (Continued)
The Company also maintains additional contractual pension benefits agreements for its top executive officers.
The Company’s benefit obligation of $22 million at December 31, 2004 has been accrued.
On December 8, 2003, Medicare reform legislation (the “Legislation”) was enacted, providing a Medicare
prescription drug benefit beginning in 2006 and federal subsidies to employers who provide drug coverage to
retirees. The Company’s net periodic benefit cost was reduced by $3 million in 2004 to reflect the impact of the
Legislation in accordance with FASB Staff Position No. FAS 106-2, Accounting and Disclosure Requirements
Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003. The reduction in the
accumulated postretirement benefit obligation as a result of the Legislation was $45 million.
Effective July 1, 2004, the Company amended its Other Benefits plans to coordinate the Company’s retiree
prescription drug coverage with the Legislation beginning in 2006. The amendment eliminated the plans’ eligibility
for the federal subsidies provided under the Legislation, as described above. The effect of the amendment on the
Company’s net periodic benefit cost was a $15 million decrease in 2004. The reduction in the accumulated
postretirement benefit obligation as a result of the plan amendment was $125 million.
The Company maintains an employee stock ownership plan (ESOP) which includes the Company’s 401(k) plan
(defined contribution plan), under which covered employees are allowed to contribute up to a specific percentage
of their pay. The Company matches the employee’s contribution, up to a maximum of generally between three and
four percent of the employee’s pay, by making a contribution to the Company stock fund (Company Match). Total
expense for the Company Match was $180 million, $159 million, and $166 million in 2004, 2003, and 2002,
respectively, including expense from discontinued operations of $2 million in 2002. Effective January 1, 2005, the
Company Match will be invested in the same way as employee contributions.
The Company also makes an annual contribution to the Company stock fund of approximately one-half of one
percent of salaries and wages, subject to certain limitations, of most U.S. salaried and hourly employees (Company
Contributions). Total expense for the Company Contributions was $25 million, $25 million, and $26 million and
the number of shares allocated to participant accounts was 813,000, 884,000, and 640,000 in 2004, 2003, and 2002,
respectively. Effective January 1, 2005, the Company will no longer make this contribution. The contribution for
2004 is expected to be made in March 2005.
The Company funded a portion of the Company Match and Company Contributions in 2004, 2003, and 2002
through the issuance of common stock.
At December 31, 2004, there was a total of $8.8 billion invested in the Company’s defined contribution plan. At
December 31, 2004, there was a total of $1.9 billion invested in the Company stock fund consisting of $638 million
of Company Match which must remain invested in the Company stock fund for five years from the year in which
the contribution was made or the year in which the employee reaches age 55, whichever is earlier; $279 million of
Company Contributions which must remain invested in the Company stock fund until the employee reaches age 55
and completes 10 years of service; and $964 million over which there are no restrictions.
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Reportable segments have been determined based upon product lines and include the following: Integrated Defense
Systems, Intelligence and Information Systems, Missile Systems, Network Centric Systems, Space and Airborne
Systems, Technical Services, Aircraft, and Other which is comprised of Flight Options LLC, Raytheon Airline
Aviation Services LLC, and Raytheon Professional Services LLC.